German coalition steers away from solar tariff cuts

Berlin, 29 October: The recently elected German coalition government has dropped plans for major cuts to solar photovoltaic (PV) feed-in tariffs.

The coalition policy roadmap for the coming legislative period agreed last week now simply calls for discussions with the solar industry and consumer organisations over measures that might be taken to avoid over-support of PV.

“This is a surprising about-face and show of support for the industry compared with the clear intentions to cut solar support just before the coalition negotiations,” said Daniel Kluge of the German Renewable Energy Association (BEE).

Germany boasts one of the world’s largest solar markets, supported by generous feed-in tariffs – the prices grid operators are obliged to pay for solar power.

However, the government has pledged to reduce the value of the subsidy – currently €0.25-0.43/kWh.

Solar trade body the Association for the Solar Economy (BSW-Solar) indicated that a sensible position would be a 9% average reduction in the tariff for new plants from 2010, instead of the 8% agreed in January.

The BSW said that a proportionate and predictable reduction in prices paid is essential for the “final jump” to PV price parity over the next decade. PV module prices have halved since 2000 due, the BSW said, to technical innovation achieved by feed-in tariffs. It argues that the solar industry paid €3 billion in taxes in 2008, compared with €2 billion paid by electricity consumers via feed-in tariffs.

The coalition also agreed to explore ways of supporting solar PV installations on brownfield land. Four-fifths of solar PV in Germany comprises small roof-top installations, but larger ground-mounted installations are multiplying, sometimes generating local tensions over greenfield sites.

However, the policy roadmap responds to general criticisms that the feed-in tariff regime is over-generous and distorts energy investment by promising a 2012 review to “protect competition”. The period between feed-in tariff degression reviews will also be decreased from four to three years.

The government said it will propose changes to the energy mix next year, to “establish a better relationship between energy and climate change policy”, with the aim of easing burdens on commercial energy users. “The energy mix is now generally ‘less conventional, more renewable’, ” Kluge said. He believes the coalition may be attempting to increase the role of nuclear and coal power generation.

The agreement also cancels the planned 2022 exit date of nuclear power with observers expecting a 10-year extension. New nuclear power stations are not to be built.

Obstacles to investment in national grid extensions are to be removed and a central grid agency established to raise the necessary capital. Other measures include encouraging biofuel and biogas use and production.

The new environment minister is the relatively unknown Norbert Röttgen, Angela Merkel’s backroom fixer in the last government. Merkel’s junior coalition partner is the self-styled neo-liberal Free Democratic Party (FDP), which has previously supported solar tariff cuts and the replacement of the EEG with market mechanisms.

However, the FDP has already backed away from key pre-election tax cut promises, and observers say Angela Merkel appears set to pursue the inter-party kuschelpolitik (non-confrontational politics) that characterised her first term.